On the contrary, there’s a glimmer

For all the brouhaha plaguing the sharemarket this year, there has been only one month, May, that stocks have closed in the red.

But that could be about to change.

With two sessions remaining, and barring any really good news on the US fiscal cliff, the major S&P ASX 200 Index is poised to close in negative territory this month.

The index was down 1.5 per cent for November at yesterday’s close, but the interesting angle for investors has been the spectacular performance during the month of some stocks that for much of the year have been unloved.

Take a bow
Seven West Media
, up 33 per cent month to date,
Ten Network
, up 18 per cent,
Fairfax Media
, publisher of The Australian Financial Review, up 18 per cent, and
Myer
, up 12 per cent.

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It’s been a tough time for media and retail stocks and some, like Ten and
APN News
& Media, are still among the worst performing stocks this calendar year. They are down more than 50 per cent.

But the rebound talks to a well-known strategy that involves the contrarian technique of picking out-of-favour stocks. Put simply, the theory goes that the best stocks to buy for the coming year are among the worst-performing stocks of the previous year.

In the US, this is known as the Dogs of the Dow strategy.

Sometimes the sharemarket is like Pavlov’s dog.

Give it good news and it starts salivating; give it bad news and it retreats, whimpering.

But many investors think a more important turning point for markets is when bad news is ignored and stocks keep rallying – or when good news is ignored and stocks continue to slide.

The outlook for retail and media stocks is still poor, but clearly some investors are putting the bad news to one side and buying.

That, some would say, is when a bull market starts.

The major index is already up 10 per cent this year, despite the worries of Europe, China and the US, and investors could be on the cusp of another bull run.

From a technical standpoint the major index is doing well by hovering above 4440 – a brick wall for more than a year now.

Get through this level and investors could easily see stocks charge through to 5000.

But that key level has been more of a blockade than 4400, so markets will need some very good news for that level to be broken.